I’ve heard many people lament over how much they owe in student loan debt but very few have considered it an “investment,” as they should. According to a Salary.com, the difference between a B.S. and a high school graduate (or GED) is $17,000 a year (from a 2003 article, but the differences are probably the same order of magnitude). If you have $100,000 in debt, that means that you’re getting a 17% ROI on your college education, I’ll take that any day.

Also, remember that student loan interest is tax deductible (depending on how much you earn, it starts phasing out after $50k AGI) and the interest rates are probably relatively low, so you’re getting a pretty sweet deal if you think about it!

Thinking about getting a masters? If you can’t get funding to do a thesis (or get the company you work for to pay for it) and have to pay it on your own, it’s worth, on average, $10,000 more a year. Oh, and, if you want another reason to go into debt to fund college, Salary.com estimates that a bachelor’s degree is worth $2.1M over your entire lifetime [article].

Just something to think about the next time you think about your student loan debt.

By the way, I think it’s totally reasonable to complain about student loan debt because private universities are ridiculously expensive to attend (but clearly well worth it) and in part because I have student loans I need to repay too (it’s not as high as some but we’re all in the same boat)… and I enjoy complaining too.

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11 Responses to “Student Loan Debt Is An Investment!”

For my personal situation, since I don’t plan on getting a job after college, some of my college debt makes little sense. The only benefit I get from it is the actual education value rather than the degree value. That being said, I am still pretty happy with my education thus far.

However, if I were planning on entering the work force after college, the investment would definantly be worth it as I belive I would easily be worth more to an employer now than in the past.

I still have regrets regarding my level of student debt, however. It’s not that it’s high; it’s actually lower than the average. It’s that it’s highER than it needed to be. I think I could have gotten through college with significantly less debt.

Of course, the lesson I’ve learned is that non-college life is the same way; if I use my money wisely now, I won’t have the same mild financial regrets about my life spending as I do about my college spending.

I have to disagree. Student loan debt is NOT an investment anymore than credit card debt is an investment. The education is the investment. How you choose to pay for the education is a personal decision. Most people I know who paid for college with student debt are still dealing with it 10 years later. Those same people, much like MoneyDummy, wish they had borrowed less. They convinced themselves they would pay it off quickly. Well, a few years, a marriage, 2 kids, a house, and a minivan later, its still there.

Is student debt necessary? In some cases, yes, but not usually. I know several people who worked their way through college, paying as they went. Guess who was more prepared for their financial life after college? The people who worked their way through school.

One other thing, private college tuition is not “clearly” worth the money. In some cases it may be; but as a graduate of two public universities (2 undergrad degrees and an MBA), I can tell you that education is more about the attitude and dedication of the student rather than the name of the institution.

Student loan debt was “an investment” to me in one and only one sense…the harassment from student loan creditors which began immediately after I left college (there were messages on my mohter’s answering machine waiting for me when I arrived) and didn’t stop until they’d utterly ruined not only my credit rating but seven years of my life, was the primary motivation to get my financial house seriously in order so as to ensure that I never had to borrow that much money again without being certain of getting value out of it. The horror of those student loans scared me into being a more conservative person about debt and a more aggressive one about preserving sources of income. And that was a good outcome.

(Yes, when I buy a house, I’ll have more debt to my mortgage bank than I did to the student loan folks…but I’ll get to live in the house and stop paying rent. Not “maybe”. Not “if the economy is good”. Definitely 100% that house will be mine to occupy. Not to mention that, in order to get that mortgage, I have to already have sufficient income to service it. I can afford to service a lot more debt at 30 with a well-established career and my own semi-successful business than I could at 19 with neither.)

I can’t say for _sure_ I’d be earning as much now had I never attended college as I actually am. You know…chaos theory and the butterfly effect and all that jazz. But I know that not a single cent of my income from either the day job or the business relates in any way to my education. My employers (and my clients) care about what I can do for them, not about what piece of paper I tried to get a decade ago.

Is student loan debt of any type tax deductable? I was meeting with a loan officer at Wachovia recently and he immediately started preaching the tax benefits of a HELOC. He went on to tell me that loan interest is not tax deductable (my wife has stafford loans right now), but I thought I recalled reading that it is deductable (I know it’s based on salary). Is this in addition to the lifetime learning credit?

Greg has the definitions right – the education is the investment and the loan is the financing decision. It could just as easily be equity (cash from a job, savings or gifts) that did it.

I know some people who are postponing college while they save money to avoid student loans. Assuming the increase in their salary after college is increased by more than the interest rate on the loans, they would be better off borrowing. Otherwise, waiting is the right move.

Your ROI calculation is a good way of looking at things, but it is missing one crucial input – the opportunity cost. If you quit work to attend college or go to part time, the reduction in your earnings for the time you are in college should be added to the tuition, fees, etc. to determine the true cost of the degree.

First of all, I made a major change to my layout. Revamped the colors and the column sizes. Let me know what you think. As always, there were some blogtastic posts this week. Jim at Blueprint for Financial Prosperity takes

I recently got my MS degree by taking out Student Loans. I think it was the smartest thing I did since I was no longer a dependant and was able to take out more money. I was able to focus on my education and wasn’t stressed about going to see TA’s and go to work at the same time. This allowed me to finish my MS in a shorter amount of time and get a well paying job. On top of all that I was able to consolidate my loans at 2 1/8th. I get more interest in my Money Market account than that, so it would be stupid for me to pay it off. I plan to live comfortably for my 20 years of student loan payments as my money grows elsewhere.

I can definitely say that I have regrets regarding my student loans. Perhaps I should have been better prepared at 18 years of age to choose a career that suited to me properly. After being dissatisfied with my bachelor’s degree I went back and pursued a master’s degree and I’m overwhelmed with debt. Unfortunately I wasn’t able to find a job after I received my masters. I’m doing now what I did before I got it. The only good thing about going back to get my master’s is that I met my husband. We both attended a private school that was farely expensive. Our student loan premiums are more than our mortgage payment. Maybe one day I can see the benefit in receiving my master’s degree. I will say that I thoroughly enjoyed my program. I guess the benefit in increasing my debt was gaining more knowledge.

The Ivy League education that I got and the respect that I’ve earned from it do justify the student debt I racked up. My education has taken me a long way and opened up many doors for me that might not have opened up otherwise so easily. I also worked part-time throughout my whole college education and agree that my work experience from that helped me eventually get more work after college. As much as I’ve complained and lamented about living with student debt, I wouldn’t have shortchanged my education just to save a few dollars. When I look back on my life as a little old lady, I’ll be glad I made my educational dreams come true rather than that I just had a couple of thousand dollars more in my bank account.

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